Building an equity millipede

Dear Graeme,

Its amazing you almost always come up with some NEW pearl of wisdom in your posts.

Thank you and nice to see you back

Regards,
TradeStar

So uhm yea this will probably be a long post
I need help to figure something out and any input is welcome

I’ve have been trading this style for a while now.
Just for this I’ve had a really small account with 100 bucks to starting capital.
Had some ups and had some downs hovering around my initial capital but the last weeks now I’ve gotten in some nice trades on several pairs against the $.
Well now my problem is I really don’t know what to do to “step it up” sort of. I right now have 156$ realized profits and 2700pips unrealized profits. And the unrealized profit can swing huge over a day almost more than my initial capital. But I have a hard time motivating to close down a winner to increase my realized capital if all I am going to do is get into the same pairs again as my long time bias has not changed.
So Should I just hang on to them until my Long time Bias changes ?
Or keep adding ?
Or start closing trades to realize profits and keep stacking ?

It’s a good problem though don’t get me wrong but it’s a new situation for me J and I sincerely don’t know what to do
Well best thing is that even if everything just goes to hell and hit my SL:s I will still be a net+ over the last months

Graeme,

Not lucky enough to ride the full move but started stabilizing after some effort. There were 40 to 50 failed attempts with an average of 7 pips loss each. Still long way to go in picking right ones.

Thanks again for all the teachings.

Regards,
TradeStar

What for works for me, I just move my stop trailing by 1 day . I feel comfortable doing that because I know if it gets hit there's another entry coming up, in the weekly direction.

I'm practicing trading like a business there is the day-to-day sales i.e moving stops taking profit or you can see it as total revenue less expenses per month when you finally diversify.

but profit taking is up to your own personal comfort.

I really feel humble reading Graeme posts, and practing this method, the hardest part for me is believing that the trade will work out.
But once I'm in I remain true to my entry and risks.


God Bless

Master Graeme, thanks for another pearl of trading art!
No, you have not failed at all.
As far as concers me, I have always thought that entering on 5' charts with tight stops could not be THE only way at it. So I am especially glad with the precisions you made today that entering on 1h or 4h time frame might also be a viable option. Now I am 100% with you!
Just one clarification if I may, concerning the stop management: let's say I got in a trade following an hourly candle. It is that same hourly candle that I will be looking at to know if the trade is going my way or if I should get out, and not the higher time frame's candle that gave me the hindsight, right ? Also, I believe stacking at those levels should be addressed differently.

Warmest greetings,
Muntu

I personally feel that using a trailing stop or some definite take profit price or signal is not really in line with Graeme's ideas.
However I too have not reached Graeme's zen-like equanimity about being stopped out at BE after being many hundreds of pips in profit.

For me, once a trade has gone in my favor at least 150-200 pips and once it has definitely lost momentum at least temporarily (e.g. a couple of back-to-back doji on the H4 charts), I look for an entry in the opposite direction.
I want to place a stop loss (either hard or mental) so that if the price breaks through I am happy the original trend has resumed and I am out of the hedged trade for no more than 20 pips.
If the hedged trade starts to go into profit I move to BE and see what happens. If the hedge closes out at BE I look for another opportunity to hedge later on. Of course if the trading gods are not smiling on me then this can work out to mean that I lose on the hedge then the trade goes back to BE on the original trade at a later time anyway... more often though this works out profitably for me one way or another and even if it doesn't I feel o.k. because at least I took some action rather than doing nothing and passively watching my profitable trade recede to zero.

Hi PipEasy,

I can see clearly that there are 3 images as below.
http://dc119.4shared.com/img/ENojpim..._solution_.png

cheers,

kk007

hi dear Graeme,

nice to see you back, been checking this thread every day.

thanks for all the teaching.


best regards,

nitroz

Hello Graeme


Once again thank you for another insightful post.

In thinking about it I began to think of some quotes on failures and my answer to your questions.

"Only those who dare to fail greatly can ever achieve greatly."
"A failure is a man who has blundered but is not capable of cashing in on the experience."
"Experience is simply the name we give our mistakes."
"The only real failure in life is the failure to try."
"There are no secrets to success. It is the result of preparation, hard work, and learning from failure."
"Life’s real failure is when you do not realize how close you were to success when you gave up."
"Success builds character, failure reveals it."
"Failure is the tuition you pay for success."
"Never confuse a single defeat with a final defeat."

There are of couse many more quotes, the answer to the question of did I fail is ...........

yes

Did I have many legs and bank over 1000 pips in this pair? yes.
Do I have any legs still open? no!

What happened?

Basically my intelligence failed me and a lack of self-belief.

Am I learning from the experience? Yes

I will continue to develop my patience and the belief to hold on to trades.
Good trading to everyone.

Sincerely,

Frank

Dear sir
Great to read your profound insight & commentary once again.
All the best
Peter

Hi Tradestar,
I guess from your low average losses on your attempts that you, like me, are focused mainly on 5 min.entries? Could I ask you if you are trading a particular time of day or using a couple of favorite entry strategies?
best regards,
greg

Good evening, all

Thank you for the compliments. I read all the corresponding posts and acknowledge your kind remarks with gratitude.

There are some readers whom have been following this thread since inception last june 2010. Thank you for the continued interest and support and hope that my contributions have provided a positive insight into your trading career.

I have befriended many fellow traders and it is a honour to be accepted as a friend and a mentor to some. There are some readers who have moved on to other methods and systems and if they happen to read this post, all I ask them is to think logically about the methods they intend to use. Methods can be differnet in its form however successful trading approach is similar between any successful traders.

It is true that my teaching/showing here is somewhat complete in a sense that I have covered almost every aspect of my personal trading approach. Having said that, there is nothing new to a successful trading approach. I too was a learner sitting where you currently sit, perhaps with different circumstances and agenda, however the same ultimate goal.

If someone was to ask me what was the most important element in my trading that boosted me from non-profitable to profitable, I would answer without hesitation that it would be the impact of my life experiences outside trading.

Whilst it may seem that trading and just living ones life is of two different context, it is definitely interlinked. Life happenings and its outcome impacts ones psyche, potentially strengthening ones capacity to become wiser at each downfall we experience in life.

Age plays an important role in your trading career or any business ventures. Having said that, there are things that cannot be comprehended at a young age.

I have received many many excellent questions. There are no such thing as a bad question and I try to reply when time permits.

However, there are some who are not thinking logically. With that particular mindset I fear that there might not be a true lightbulb moment. But I do know that the continuous effort will soon broaden ones perspective.

I apologize for the length of this post but I believe this post answers to almost all the questions received in my inbox.

If you value a honest opinion from myself, trading is not a means to escape.

Also, it can never be calculated. You need to go with the flow/direction.

I sincerely believe that taking short-term profits here and there will never grow your account to its full potential. Infact you will be lucky to have increased your account when you view your statement 3 months later.

However, there are some successful scalpers and their success is based on interpreting the 'momentum' of price. They wait for moments when all the mass traders arrive at a unified decision in direction and capture the ensuing compelling momentum. And before the momentum dies they will exit their position, taking profit.

In this forum such scalper/short term trader is Greg Wilson, please click into my profile as I have vouched the gentleman and please have a look into his current gbp/jpy thread which has been running for the last few years. His pictures are worth in gold and his trading ability is unmatched. Snapshots of his profits, despite what few people say, is from FXCM client mangement (I would know as I also use FXCM) and not from mt4, this is LIVE account. For anyone who is interested in short-term profit and profit by end of the week, please follow his guidance. Strongly recommended.

If I were to suggest any tips for this type of trading: Trade just the 3rd 4 hour candle everyday (for myself this is usually london open, during summer time or 1 hour before london open) on high impact pairs (that has the potential to move greatly in short amounts of time); eur/usd, gbp/usd, gbp/jpy. It does not matter as long as the 3rd 4 hour candle is close to europe/london open.

Statistically at least one out of 5 weekdays in a given week will move greatly on the 3rd 4 hour candle. For this to work, you need to ascertain the potential direction of the movement and trade when you believe it is a low-risk high potential; usually a 4 hour candle with a very short retrace, less than 33% will be your goal. You must be able and upskilled enough to interpret 1hour, 4hour, daily, weekly chart simultaneously and understanding each individual chart whilst condensing all the information from the 4 charts into a single understanding. Your aim would be to capture the full move and preferably prepare to leave it open for a day or two if momentum continues on. Experiment with opening 2 positions with 1 taking profit earlier and 1 for the ride. This will smooth out your equity curve.

For those who wants to see larger profits but not the means to hold onto them; swing traders. There is one main question you need to ask as a swing trader when you open the charts on Monday.

1. Will this weeks weekly candle be a bold up or bold down and will it continue in the direction of the following weeks.

Keeping the answer to the above as your main direction, you are aiming to place a position early in the week and see that it survives till end of the week (which is the best type of weeks; opens and moves straight forward). Most often it wont, then prepare to take swing low or swing high within the week (watch 4 hour chart) towards the main direction. Once again it is to your benefit to let the position grow a week or two before cashing out. If your position was inserted and the week ends up as a bold candle towards your direction, keep it open the following week as the momentum will most often continue on. Anticipate the best scenario whilst keeping your risk minimum. Make your anticipation into reality.

The above is better on monthly charts. Ascertain the main direction first and then enter early in the month. If that fails, enter swing low or swing high of the month and let it ride the full month. If the month ends up as a bold candle, closes above/below open price of previous down/up candle, EMA crosses over, if any of these happens then the more reasons to hold onto them.

Position trading. It will be inevitable transition for any successful trader. Raising lot size to make more profit can lead to destruction of ones account. It also plants greed and fear into ones trading. Raising lot size will eventually happen when the time is right. If I were to place a numeric rule, I would say, your current trading account should have x3000 your lot size. If you are $1 per pip, I say start with $3000 and the means to re-fund your account twice more if necessary. There is something horribly wrong if your first $3000 account blows out and one should stop trading at that point and review. The extra 2 lots of $3000 is more of a psychological backup. It is not necessary but trading with your last $3000 is a burden.

Stacking. One of the most asked questions and I understand why. Stacking is adding more positions into your current standing, anticipating the current direction to continue on whilst your interest is now potentially worth more. Stacking is an extremely important tool for myself. It makes a 2000 pip 3 month move into 20000 pip or even more for the same move. However, it can be disastrous to the amateur traders who believe they are stacking successfully but border-line gambling. Each newly added position must be treated as your very first position, which means that you need a whole new set of reasons as to why you are entering (again). Just to leverage your profit is not a reason to.

Last 30-40 pages of this thread was dedicated to 5min trading however 5min trading is definitely out of reach for most traders. You will need an upskilled interpretation of momentum + the ability to reason on the fly whilst taking guidance of multiple timeframes, indicators + the ability to know that it is not working out and retreat.

5min trading should only be attempted when there is a strong movement in the market. I believe the focus of the last 30-40 pages of this thread gave off the wrong impression and if so, please read the very first 2 or 3 post of this thread from myself. Nothing has changed, although I do trade 5min chart, much of my trading is done on 1hr, 4hr, daily without stop loss in most situations. I do use stop losses when trading 5min chart and when there is a pending news release and a personal guidance within the frantic action. We will come back to stop loss little bit below.

Stacking on lower timeframe is playing with fire. You either know what to do or get burnt. I stack on lower timeframe as I know some moments during the week are considered a very high probability. A preferred moment is when (for example) the main direction of the week is Up and price get stuck in range or pennant with price touching support and then resistance and then a compelling breakout towards the main direction. If Im present at such moments then I would zoom into 5min to take trades whilst anticipating/aiming profits of the weekly/main movement. This is the best risk:reward possible. However, do not get fixated with 5min trading.

Having said that, efficiency of stacking is correlated with the type of trader you are. Stacking on the 5min chart to take profit of 20-30 pips per position in the next few hours is not what stacking is about. Stacking becomes far more efficient for traders who aim to trade longer term.

If I were to place a numerical rule (this is the first time for such rule, but I see the necessity)

1. If you are aiming at growth of the next 2-3 days, ONLY 1 more position, maximum 2.
2. If you are aiming at growth of the next 1-2 weeks, ONLY 2 more positions, maximum 4.
3. If you are aiming at growth of more than 2 weeks, 2-3 positions per week is suffice.

With the above, you will still build an extraordinary equity pyramid. Once you are able to ascertain good moments and bad moments in the market then you will be able to justify the number of stacking within your reasoning.

If you are stacking to see your demo/live account swing wildly in equity, then it is something I would frown upon. If you see that all your opened position suddenly goto RED when retraced by 40 pips or so, you ARE OVERSTACKED. Period.

Dont forget, just 1 more position after your initial position is good enough.

Stop losses. We are dealing with an immensely large market. I cannot recall the exact figures however the amount of money transferred/siphoned/diluted/bought/sold for a 40 pip movement is 300-400 million. A very rough figure for eurusd. Another rough figure, daily transaction volume between eur and usd is 40% of $1 Trillion (million million) per day. Im not sure how it is possible to calculate all the infinite levels of buying and spending between the two countries however, if those rough numbers are indeed true a 40 pip movement for eurusd is about a fraction of a percentage from daily volume.

Then the question one should ask is under what pretence are we measuring and adapting our 40 pip stop loss. Sandwiched between $1 Trillion is ones 40 pip stop loss that is open to the multitude of transactions across all levels global economy.

It is more or less a small bottle floating in the ocean. It will eventually follow the current (main direction) but it will bob backwards and fowards in the ever continous motion of ripples. Can you really sit on your dinghy and say that bottle will not travel backwards 200 metres? It can and it might not but the fact is that your bottle is open to infinite scenarios which at the scale of the given size of an ocean, 200 metres will most often will be met. Ripples/wavelengths, trajectory, frequencies all are interrelated in nature. Push and pull (buyer and seller) is evident in every aspect of nature.


Hence, coming back to stop losses. A stop loss will often be met. Despite your perfect indicator and trading skills, the multitude and scale of the transactions that whizzes around us, our 40 pip stop loss is more or less a very very very close automatic loser function.

How many times have a trader watched his position hit 40 pip stop loss and then the price travel forward in its intended direction. Alot more than we care to admit and realize. However, does many traders know what a 40 pip stop loss really indicate? Its not even a fraction of a fraction of what is really going on behind the scene. The market could fart and it will hit our stop loss. I stated in the very first few posts that I do not usually use stop loss and here is the reason why.

A bottle will eventually follow the main current of the ocean. Despite the bobs up and down and sideways it will follow the main direction. If we were to bet on the bottles outcome, I simply cant (not within my ability) to estimate how far it will go backwards before coming back on the main current or how many times it will do that. But I can definitely place my money on the eventual direction and the location where it might go.

Given such figures/facts about the market, one could design a suitable trading method. A method that sounds logical and respects the greater intentions of the market/economy. Every reader in this forum attempts to become a successful trader by reading and emulating exactly to the acclaimed professional traders of this forum. First, you will never be able to emulate someone exactly. Every single person is unique with their own set of reasoning and understanding which is then influenced by ones circumstances and agenda. There can be general schematics of how to trade with a flow chart, do 1 then 2 then 3, if trading was like cooking 3 minute noodle. However, this is just general. The application and outcome will differ even at a hair thin discrepancies.

Rather than combing this forum looking for the golden method, please think on your own terms. Gather facts and numbers and implement according to your own thoughts and decisions. Evolve around your thoughts. Always trade the logical and sensible sounding approach. Trade what is evident and present in every chart, pair, market in this world. Look for the generic solution, a master key that opens all treasure chests in the world.

All of the above has been convered before and some on numerous times. There is nothing new here. Perhaps there are little more meaning than first meets the eye.

There has been few requests that I monitor their trades on a regular basis however I currently have a very tight schedule as Im winding down this year and plan to retire.

Once again apologies for the length of the post and my laziness to answer each of the messages received individually however I would end up copying and pasting most of them. However, I will still continue on to replying everyone messages but please understand if they are brief in details as I have accumulated almost a months worth in my inbox.

Thank you for the interest in the book however there is no need to send any cheques as a copy will be sent to you at my expense via post upon its completion.

Please feel free to ask me any questions or review your last few weeks of trades. Send attachments or pics of your trades taken with current look of the market and I will work out how and why you have taken them and could offer you a tip on improvement.

My thoughts are with everyone and truly hope that your successful trading career is the start of a positive influence on both your family and community. A means to a greater good for all.

Sincerely,

Graeme

Edit: If you have a question that you would like me to answer, the best way is still the private messaging function of this forum.

Hello,
I will be trading the Aussie this week. Monthly and weekly hinsights very bearish. On the daily picture submitted, there seems to be a Head and Shoulders, with the necline just broken. I know a pattern can be subjective at times, but I got to have a reason for taking the trade. So, if it is to go the same distance as from the head, then it is worth trying. I will try and get in before the rates are announced, though consensus is for the status quo.
Muntu

Mr. Graeme, So according to your theory we should Buy Eur/Usd because its weekly price closed at 1.4809 , and previous weeks open price was 1.4409? Pl. correct me if i am wrong.
Thanks in advance. I want to follow your theory and put it into practice from today onwards.
Bomi

Muntu - Correct. If that breakout is valid it will go DOWN from here. I also like your plan about probing early. Please do not let losse of your intended aim. Within our focal interpretation everything indicates sell. Bearish engulf, closing below support, recently bounced away from 200ema, 5/10 ema crossed over. A good choice and a pair that I will also watch for this week. If this week becomes a bold weekly DOWN candle please refrain from closing it before growth as there is great potential for more.

Bomi - Sorry to answer your question in the same post as Muntu. Im not sure if you had the time or the chance to read the thread and I know it is a daunting task as there is so much to read however, eur/usd is a very clear buy momentum at the moment with enough valid reasoning. Not just becuase it closed over 1.48009 but the fact that everything on weekly/monthly, emas, engulfs indicates so. I will further add positions into this pair this week however it will be maximum 2 attempts and not anymore. The reason is that it has already moved 2000 pips in the last 3 months. However never assume something is 'due' cause it hasnt happened in a long time, that is common gambler/traders fallacy.

What you can do Bomi, is keep the hindsight UP and probe 1 or 2 early in the week and maybe one more mid week. If a pair requires anything more than 2 attempts to have a surviving position then already it is not the best type of trading week. Best trading weeks are the ones that opens and charges straight froward in one direction.

There are many other pairs ripe for movement and would be better choice than current eurusd. Look for stalls on daily,weekly, monthly and flag these pairs so you can watch the inevitable breakout happen.

Everyones main aim is to place a position or few in the main movement of the year for growth. To my personal beliefs, this is the only logical and sensible method to create profit in trading. Famous traders in our history made extravagant wealth from growth and not the random fluctuations of hours or even days.

You may not be able to pay yourself a wage by withdrawing on a weekly basis (unless you have a very large account and 5-7 pips equates to a week of living expenses) however there will be frequent large cheques that should last you more than enough for the next inevitable cheque.

Sincerely,

Graeme

Thank you very much Sir, for your prompt answer. I have PRINTED OUT IN BOLD your Theory n have Kept Next to my PC. So that I Remember this .
Bomi

It is my pleasure Bomi.

Aplogies but I just edited/added large portion into the same post so please re-read if necessary.

Good night everyone.

Sincerely,

Graeme

Mr. Graeme, Another Q. Eur/Aud Highs were around 1.3617 and 3628 for the last three days. Should we wait till that price to short?? so that we have Nice positions??
Bomi

Another great question and unfortunately last one before I turn in.

This is not an attack on your integrity or your question however if you re-read your question you could notice that it also falls under the common fallacy.

Because something hasnt happened for xx days...
Because price went to xxx and dropped so it will again
Because it moved xxx pips yesterday it will not move today..
Because it has been in a downtrend, DOWN is due...

or any of its variants is misconception. Anything 'about to' or 'due to' is incorrect. Nothing is ever scheduled to happen in the markets.

It is also traders attempt to create a planned flow chart of action. If A happens then I will do B. This might work few times but the ever changing markets will outmanoeuvre your flow chart sooner or later. One of the reason systems do not work in the long run. Or perhaps profitable trading approach does not require such systematic approach.

Bomi, as per your focal interpretation (this includes candle shapes, wicks, patterns, indicators, momentum) if you believe it is time to enter then do so. Enter and watch the price evolve around your position and act accordingly thereafter. I just hope that pesky stop losses are large enough to help price evolve and paint the full picture before it touches you out.

I hope 3x20 exercise have upskilled your focal interpretation and if you havent done so please go back and try 3x20 exercise.

If you wait for 1.3617 then what happens if price never gets there but just opens and runs straight down.

Good night, all

Sincerely,

Graeme

Beautiful one sentence summary of the markets :-)


Thank you Graeme for recent posts ...... always encouraging and inspiring.